Research on Risk Management of Listed Chinese Enterprises Based on Institutional Activism

The expropriation of minority shareholders by controlling shareholders is the central agency problem in listed Chinese enterprises. There has been an explosive development of institutional investors in China recent years but the governance role of institutional shareholders is controversial. This study investigated the role of institutional shareholders in risk management of listed Chinese enterprises. By constructing a model, this study researched on the risk of listed enterprises and find that controlling shareholders will expropriate minority shareholders. Then this paper studied on the role of institutional activism in mitigating agency problem and improving performance, by including in the model one institutional shareholder. We find that institutional activism can mitigate agency problem and improve performance. Our finding suggests that institutional activism can play a beneficial role in risk management and eventually sustainable development of listed enterprises.